Overseas Property Market

More property cooling measures across the causeway? Take Note – 28 Nov 2014

Important Updates to Take Note if you intend to invest in Malaysian Property.

Johor is planning to impose an additional 2 per cent tariff on property buyers from overseas across all segments of the property market from May 2015.

Penang is mulling over introducing a 3 per cent levy on foreigners purchasing homes next year in 2015.

The intention is similar to Singapore’s, to prevent its own real estate market from bubbling and to placate locals who lament that foreign investors are pushing prices out of their reach. Singaporeans remain the largest foreign property purchasers in Malaysia, followed by the PRCs. For previous updates on the property scene in Malaysia, you can click here.

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Pricing shocker at Puteri Harbour, Iskandar, Malaysia – 26 Sep 2014

In light of the property slowdown in Iskandar, the latest indicative RM1,000 psf launch price for the latest launch Southern Marina at Puteri Harbour, Iskandar had some investors gasping for oxygen.

This is because just prior to this, another project at Puteri Harbour, The Puteri Cove had launched “sea view” units, priced at between RM1,300 to RM1,450 psf and marina view” units at between RM1,500 to RM1,600 psf.

Because The Puteri Cove registered sluggish sales, the Southern Marina developers did not want to suffer the same fate.

As mentioned before, it’s hard to access caveat data of property transactions in Iskandar. One usually has to rely on an array of developer’s indicative price list to get a sense of where the price is going.

Interestingly enough, I managed to dig out an old price list of Encorp Marina. I had been interested to buy a marina/sea fronting unit back in 2012 but as the better units were blocked for sale, leaving only the ones at the lower floors, I walked away. A quick look at the price list showed that prices for the better units were going for about RM1,250 psf. Hence, prices have indeed corrected since 2012.

Country Gardens which launched 9,600 units for sale in Danga bay still has about 60% of inventory stuck. Guangzhou R&F Properties, which has launched 3,000 units for sale in Tanjung Puteri recently had its credit rating downgraded to BB-, as it is not expected to hit its sales target.

For those who have bought into Iskandar, be mindful of the latest pricing development there. Most projects won’t be completed until 2016/2017 and already some developers have issued delay notice to buyers. If you haven’t already profited by flipping your Iskandar property, be prepared to hold on for an extended period.

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Local promoters of EcoHouse projects, What Say You? – 15 Aug 2014

For investors still clinging on to the hope that their investment in EcoHouse’s projects in Brazil is still safe, it just got worse.

Up to 1,500 Singapore investors have invested up to S$70 million in EcoHouse projects. It is not known how many of them actually got their money back.

The Brazilian Embassy in Singapore confirmed yesterday that it had no prior knowledge of the existence of EcoHouse’s operations in Brazil. The embassy also found that there was “no record of any agreement with any company bearing the name ‘EcoHouse’ related to ‘Minha Casa, Minha Vida’ (Brazil’s national housing programme), or any other federal programme”.

Yet on its website, EcoHouse claims that it was chosen by the Brazilian government as “the only UK company to date officially authorised to build developments under Minha Casa, Minha Vida.”

Who to believe?

1) First, take a look at this slick YouTube Video by EcoHouse

2) EcoHouse had promised a 20 per cent fixed rate of return for a 12-month investment contract with a minimum outlay of S$47,810, but many Singaporean investors have not received their returns or their capital despite their contracts reaching maturity.

Why Empower Advisory DID NOT encourage anyone to invest or introduce anyone to EcoHouse projects

First Sense

Does it stack up?

The logic and risk of the EcoHouse projects in Brazil

We were not able to verify the claims of EcoHouse nor its promoters. Recourse action if things go wrong is murky and not well understood.

Promised 20% returns a year do not make sense when the developer can borrow in Brazil and partners for less than that and pocket more profits for itself.

For its low-cost social housing, will the Brazil government really allow a private developer to make so much margin from low cost social housing that EcoHouse can afford to give investors 20% return within a year?

Returns to early investors could most easily come from later investors similar to a pyramid scheme.

Marketing efforts of EcoHouse

Why we were not overly impressed

Reported International Development Awards that EcoHouse won

We’re in this industry long enough to know that such awards can be bought and even staged.

Slick YouTube Videos

Surely the videos have to be attractive to loosen your wallets and purse.

Swanky Address

EcoHouse Group's office on the 42nd storey of Suntec Tower Two is rented. The money came from early investors?

Regular investor/chill out meetings at its office

EcoHouse invites via Eventbrite

Just a way to build rapport and get more investors in through word of mouth marketing by earlier investors.

Reports of buying frenzy at their launches

Again, we’re in this industry long enough to know that buying behavior can be manipulated by planting staff within the audience to pretend to sign up and buy.

Other tricks such as having staff (planted or not) tell the audience like, “Oh my laywer friend invested too, my doctor friend invested also, breaks down the defence of many people.

Unsavvy investors start thinking, “Even doctors and lawyers invest, surely the project is ok and I can’t be wrong."

For a long while, a lot of good stuff about EcoHouse was reported by Property Guru. And we’re not sure if Property Guru verifies any of those claims by EcoHouse before publishing them.

Some folks might think, if what EcoHouse claims on Property Guru is reported, it must be true? Not us.

EcoHouse set up booth in SMART Expo 2013 in Singapore at MBS 28-29 Sep

Anyone can set up booth at SMART Expo. It’s just marketing. It's not a sign of credibility.

EcoHouse theme of being social conscious and be part of a meaningful programme to build sustainable low cost social housing in Brazil

Just a way to tug at heartstrings. Remember people with no verification asking you to donate to a worthy cause. And you don’t even know how real it is?

Some early investors reportedly got their 20% return with capital

Similar to a pyramid scheme, it could be structured such that early bird gets the worm to entice other birds and provide buffer to continue the payout. We cannot verify how many investors actually got their returns + capital back.

However, our harshest words are reserved for local promoters who got Singaporeans into this investment. They know who they are and if you are a stuck investor, you know who they are.

1) What was more important to you? Your commission?

2) Did you not consider the risk of the projects by EcoHouse that we considered and firmly declined any involvement in?

3)Did you care that Singaporeans could lose their hard earned savings?

4) What kind of independent due diligence did you do? Did you even do any?

5) Have you been honest with the investors you bought into EcoHouse investments?

6) Are you involved in any of the smoke screen and mirrors?

Your investors you brought in need and deserve answers.

It is a very painful experience for many Singaporeans stuck in this investment. That is why we must stand up and warn those around us about promoters who introduce such hurtful investments and projects. We have also exposed some smokescreen and mirrors tricks commonly used The more we speak up, the less folks will get hurt in future and learn to be more careful with their money.

The number of new homes being built in Johor is estimated to be about 40 to 45% of the current stock. Recent launches in Iskandar range between RM800 and 1,200 per square foot, with prime units going for RM1,800 psf and above. The entry of China-based Country Garden Holdings, with its mega-launch of 9,000 apartment units at one go has gotten local developers worried, with some believing the magnitude and scale of such launches could lead to a property bubble. What is interesting is the unrefuted rumour that Country Garden has been offering its Chinese buyers a deal that packages the purchase of a property in China with a unit in Iskandar to boost sales.

Close at Country Garden’s heels is Hong Kong-listed Guangzhou R&F Properties, which recently bought 116 acres in Johor Bahru from the Sultan of Johor for RM4.5 billion to develop what has been said to be another mega-mixed development.

Not far behind is Hao Yuan Investment, a China-linked company that is forming a joint venture with Iskandar Waterfront Holdings to develop 15 hectares in Danga Bay.

Post-Malaysia Budget 2014 has seen poor take-up rates with developers failing to register healthy bookings for new projects even in the prime area of Puteri Harbour. For those not yet invested in the property market across the causeway but are thinking of doing so, do conduct your due diligence! This is critical in the face of a softening market across the Causeway.

Our Best, Always

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Learning from Ireland’s Property Bust – 30 Dec 2013

In 2004, Ireland was one of the world’s wealthiest countries and the year after, was judged to have the world’s best quality of life. On the back of low corporate tax, it attracted a lot of foreign direct investment by European MNCs, which fueled its economic growth. Yet, it went all wrong so quickly through a series of missteps. Public spending rose dramatically while income tax was cut. Then, government policies “encouraged” property speculation and allowed a huge housing bubble to develop.

House price growth between 2001 and 2007 was a bubble, driven by banks over-extending themselves (lending relative to deposits) and over-extending borrowers (higher loan-to-value). The sharp rise in property forced rental yields down. When the economic crisis came, investors who were already cash flow negative since rental income did not cover holding costs exited in a hurry, helping to force house prices down.

In 2010, Ireland was forced to take an economic bail-out from the European Union of more than €67bn (SGD117bn) from the IMF and the EU to rescue the country from bankruptcy. What a reversal of fortune in a mere matter of years!

The credit-fuelled boom in property that caused the spectacular crash, affected Irish citizens from all walks of life. Lead Singer of popular Irish boy band Westlife, Shane Filan, was also a casualty. Like many highly indebted Irish property developers, he filed for bankruptcy as the property development company he started with his brother collapsed under a mountain of debt. Before the economic crisis hit, Shane and his brother Finbarr had borrowed millions from several banks in Ireland. Recently, he came back as a solo artiste (after Westlife disbanded) to start all over again.

Today in 2013, Irish property prices in general, are about 50 per cent below their peak in 2007. The Irish Government estimates that there are 1,300 so-called ghost estates and hundreds of thousands of unoccupied new homes, abandoned by developers and investors gone bust. Some abandoned projects are in such bad shape that the Irish government is actually demolishing them as they are posing health and safety risk to people around them.

Will this happen in Singapore? This recent Irish property bust fallout has been studied by many governments around the world and many know the consequences of allowing a property bubble to go unchecked. You can certainly bet on our government to engineer a soft-landing no matter what.

Our Best, Always!

Summary of latest cooling measures in Malaysia – 6 Nov 2013

The air-con to chill and rein back property speculation has been turned on full blast in Malaysia with the announcement of Malaysia’s Budget 2014. Right now there is no clarity if it applies to all of Malaysia, or if certain strategic zones such as Iskandar will be exempted.

TO SUMMARIZE

1) === Real Property Gains Tax (“RPGT”) ===

First, a bit on RPGT. RPGT is imposed on the net gains from the disposal of the property after deducting the acquisition price and other expenses incurred until the property is disposed. Other expenses include stamp duty, legal fee, cost of renovation, commission for sales and administrative payment. RPGT exemption is given for up to RM10,000 or 10% of the net gains, whichever is higher, from the disposal of real property by all individuals.

For Malaysian Citizens and PRs

30%, for properties disposed within three years of purchase

20%, for the disposal of properties held for four years

15%, for the sale of properties held for five years.

0% for sale of properties held for more than five years

For Foreigners

30% for properties disposed within five years of purchase,

5% for properties sold after being held for more than five years.

(Effective date – For disposal of properties and shares in real property companies from 1 January 2014)

2) === Minimum price of property that can be purchased by foreigners ===

To be raised to MYR1m (SGD391K), from MYR500,000.

3) === Developer Interest Bearing Scheme (DIBS) ===

To be outlawed. Developers can no longer incorporate interest rates on loans in house prices during the construction period. Financial institutions are prohibited from providing final funding for projects involved in the DIBS scheme.

WHAT NOW?

Analysts were largely surprised by the weight of the cooling measures, expecting a lighter touch. To what extent will savvy investors be put off by the increased RPGT? One thing’s for sure. The Malaysian government wants you (as a foreigner) to be a long term investor in higher value property, not a speculator.

Our Best, Always!

New property tax for foreign property buyers in Johor? – 9 Oct 2013

Latest news about property purchase in Johor where Iskandar is located. A new fee, expected to be 4 to 5 % of the property (new/resale) price might be implemented by year-end or early next year and will apply to all properties (commercial/industrial/residential).

This new fee if implemented (applicable only to foreign buyers) will not deter Singaporeans from snapping up properties in Iskandar as most Singaporeans only use Singapore higher property prices as a reference point in buying “cheaper” properties across the Causeway.

The risk in buying such properties is very real due to the opaque property transaction information in Johor.

Nevertheless if you do invest in properties in Johor, do ensure that the project is a unique one and not a usual run of the mill kind, otherwise when it comes to disposal, you will not have a easy time. Do not use Singapore’s usual buoyant resale market as a reference point. You are just looking through the wrong end of your binoculars.

Our Best, Always!

Property buying curbs in Asia – 18 Jul 2013

==================================================================================================================================================It’s not just foreign property buyers feeling the heat in Singapore. It’s happening all over Asia as confirmed by Knight Frank recently. If you have been following the news of late, you would have guessed as much.

Hong Kong has adopted property buying curbs similar to those in Singapore, ruling that foreigners must pay a stamp duty of 15 per cent on the purchase price.

Rising property prices in Iskandar in Malaysia have led the Johor state government to implement higher taxes on foreigners owning properties by end 2013. In Vietnam, foreigners can buy apartments or condominiums with a 50-year lease but are not allowed to own land. But ehh,,,Vietnam? I’ll skip that country for now.

In China, only foreigners who have worked or studied there for at least a year can own a home for their own occupation. The list of Asian countries with such restrictions on foreign property buyers go on.

Any safer haven? Well, accordingly, restrictions are less severe in Thailand, where foreign buyers can acquire freehold apartments in up to 49 per cent of a development. In Australia, non-resident foreigners can buy uncompleted property or even land earmarked for development.

How does one make sense of it all? There is always a time and place for everything. Perhaps, sunny skies are shifting away from property and shining more favorably upon the stock market. Anyone game to join me?

Iskandar Malaysia – Data please? – 27 Jun 2013

==================================================================================================================================================Where are the facts on Iskandar Malaysia?

Everyone these days seems to be saying, “Let’s go to Iskandar for our sure-win property investments!”

Agents are sprouting anecdotes about prices jumping in highly sought after areas such as Medini and Danga Bay. The question is where are the hard verifiable figures?

In Malaysia, as a real estate practitioner, you can access data compiled by the Valuation and Property Services Department, a government agency, through its website – Jabatan Penilaian and Perkhidmatan Harta (JPPH) but presto, there is nothing much to be found about Iskandar property market statistics.

I have no idea if any property agents and consultants in Singapore actually keep track of sales volumes and price trends there. For me, I rely on my contacts in Malaysia to give me info on the ground. What to do, as there is no such Malaysian equivalent of our Urban Redevelopment Authority’s website to check on any amount of information, including the number of homes sold in a particular development last month and transacated prices among other information.

And the best part is, few developers publish official statistic information on their projects. Don’t you feel frustrated if you want to monitor property trend? The lack of good quality property information about Iskandar only facilitates people with vested interests to cherry-pick anecdotal data to talk up the market.

I’m not alone who take that stand. CBRE Malaysia’s associate director of estate management Kevin Goh said that unscrupulous agents and developers sometimes use the information gap to make false claims about their properties.

For example, marketers may claim that the project is 80 per cent sold and selling fast when the real number might be closer to 30 per cent.

Hopefully, when Iskandar matures and the sub-sale and resale markets are more established, good quality information will be more easily available. That will make it harder for touts to make inflated claims.

Without access to common property comparables like psf and rental yield, buying an investment property in Iskander is as good as buying a car without test driving it.

With all the news on numerous Singaporeans buying homes in Iskandar, one would have thought that the past reputation of uncompleted homes, abandoned projects or delays in completion haunting Malaysia is gone.

But it appears not to be.

Just recently, a mixed development project consisting of hotel, shopping mall and residential units KSL D’Esplanade Residence, minutes away from the Causeway found itself in the limelight after irate buyers complained of delays to the press.

Buyers say that they were given conflicting information on the completion dates of the project.

Here’s what the developer said – “The 80 per cent completion rate cited in 2011 referred to the lower floors and that “every floor has a different completion date. But projects first get three years unless you apply for an extension, which we did not plan for. If we had applied for the extension to five years, this year would have been the fifth year, and we’d be in time to complete the project.”

The firm said the sales and purchase agreement begins only on the date of purchase, not the day which construction started, meaning every buyer’s three-year duration started at a different date.

That’s not all. According to the brochures, the hotel would have an 18-hole mini-golf course but buyers found out later it had been replaced by a water theme park. An exasperated Singaporean buyer commented, “I did not buy the unit to stay next to a wonderland.”

Ouch! So the completion date of the project is a moving target. And the sales brochure is a magician spell book. Just look at the brochure picture vs the project in progress. Do they look the same?